Consumer Directed Health Plans (VEBA, HSA, FSA)
What is a consumer directed health plan? CDHPs are, simply defined, the combination of a lower cost group health plan and an individual account (either VEBA or HSA) for each employee into which funds are placed to be used for medical costs, or saved, at the employees discretion.
Consumer Directed Healthcare Plans (CDHPs) are account-based health insurance plans that:
- Couple personal healthcare savings accounts to lower cost health plans.
- Empower employers and employees to preserve the value of insurance premium for future application of healthcare expenses.
- Allow individuals to purchase more affordable health plans that reflect their true insurance needs.
There are four basic types of personal healthcare savings accounts:
- Flexible Savings Accounts (FSAs) contributions made by employees
- Health Reimbursement Arrangements (HRAs) employer promise to pay as expenses occur
- VEBA-funded HRAs contributions can only be made by employer
- Health Savings Accounts (HSAs) contributions can be made by both employer and employees
CDHP: Fact and Fiction
CDHP: Fact and Fiction FICTION: FACT:CDHP will only make sense for a few, young people.
CDHPs discourages people from getting the healthcare they need.
- CDHPs actually work best for the majority of employees and their families. The reason is simple: typically 70-80% of the plan members of any group incur 20-30% of the group's total medical expenses.
- Most people do not know whether it is worthwhile to pay more for their insurance upfront. Claims vs. premium value is hard to predict.
- CDHPs provide low cost, adequate protection for the 20-30% who do require greater amounts of healthcare.
CDHPs actually encourages group members to improve their health, since most CDHP members are more inclined to exercise, use wellness and prevention resources, and follow their prescribed therapies more closely than traditional plan members.CDHPs are complex and difficult to understand and require more paperwork.
- CDHP communications and administration have become so commonplace that advanced administration and communication tools are available that make personal account access and administration easy and practical.
- CDHPs do require individual planning and monitoring of their healthcare expenses.
- CDHPs administration now allows for reduction of paperwork and offers automatic claim processing.
CDHPs simply shift more costs to me and my family.
A properly designed CDHP can actually give you greater value over time. The key is to think of your healthcare expenses terms of years rather than just one year. As the value of your personal healthcare savings account grows, the amount of insurance you need declines along with your out of pocket expense exposure if and when you do become ill or injured. Over time, your CDHP can be of far greater value to you than a traditional plan and can provide added security against your deductible cost exposure.